George Osborne has risked undermining Britain’s international reputation on
the financial markets by delaying the planned rise in fuel duty, a former
Tory chancellor will warn today.

Lord Lawson says that Mr Osborne must increase fuel duty next year to reassure international investors that he is not “on the run” and is determnined to cut Britain’s debts.

Last week, the Chancellor announced that a 3p rise in fuel duty due to begin in August would not be implemented until January.

Ministers struggled to explain how they would fund the £500 million cost. It follows a series of reversals after the Budget, including scrapping plans to curb tax relief on charity donations.

In an interview with Fraser Nelson, The Daily Telegraph columnist, for today’s Week in Westminster programme on BBC Radio 4, Lord Lawson urges Mr Osborne to demonstrate he is committed to cutting the deficit.

“If I had been in his shoes I would not have deferred the petrol tax,” he said. “I think it is now essential that in January, he does do it. If there is a further deferment in January … that would be very bad.” He added: “So far the Government – I think quite rightly – has continued to enjoy the confidence of the financial markets, which means we don’t have any difficulty in borrowing to finance this appallingly large deficit… at a very cheap rate. But it is important to maintain that reputation.”

Lord Lawson said future Budgets may be more difficult if Mr Osborne lost the confidence of international investors.

“My concern, that it might be thought… that the main thrust of policy is no longer secure,” he said. “And once the financial markets – let alone anyone else – think the Government is on the run, then the task of maintaining the policy is very much harder.”

He conceded that Mr Osborne’s job is complicated by the role of the Liberal Democrats in drawing up the Budget.

Alistair Darling, the former Labour chancellor, who was interviewed for the same show, said: “If I was George Osborne, I would worry that all this looks a bit messy and it doesn’t look like they are in control and that’s where you need to worry as a politician.”